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April 10th

The following Management’s Discussion and Analysis (“MD&A”) is the responsibility of management and has been approved by the Board of Directors. This MD&A is intended to enable the reader to assess our financial position and results of operations as at and for the year ended December 31, 2016, compared to our year ended December 31, 2015. The information in this discussion should be read in conjunction with our audited consolidated financial statements and accompanying notes for the year ended December 31, 2016. Unless otherwise noted in this MD&A, all information was prepared as at April 10th.

As used in this discussion, references to “Economical”, “the Company”, “we”, “us”, and “our” refer to Economical Mutual Insurance Company, and, unless the context otherwise requires or is otherwise expressly stated, its consolidated subsidiaries.

We use both generally accepted accounting principles as defined by International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), which have been adopted as Generally Accepted Accounting Principles (“GAAP”), and certain non-GAAP measures to assess performance. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other companies. These measures are outlined and defined in this MD&A. See Section 13 — “Non-GAAP financial measures”.

This discussion includes product and brand names, trade names, and trademarks of Economical, our subsidiaries and other companies, each of which is the property of their respective owners.

All dollar amounts are in Canadian dollars. Certain totals, subtotals, and percentages may not reconcile due to rounding. A change column has been provided showing the variation between the current year and the prior year for certain financial analyses.

This document contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from these forward-looking statements as a result of various factors, including those discussed later in the document. Please read the “Cautionary note regarding forward-looking statements” included in this MD&A.


Certain of the statements made in this MD&A, including, but not limited to, statements in Section 5 — “Canadian P&C industry outlook”, and statements regarding our current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements, or any other future events or developments constitute forward-looking statements. When used in this document, the words “may”, “will”, “would”, “should”, “could”, “expects”, “plans”, “intends”, “trends”, “indications”, “anticipates”, “believes”, “estimates”, “predicts”, “likely”, “looking to”, “potential”, or the negative or other variations of these words, or other similar or comparable words or phrases, are intended to identify forward-looking statements.

Forward-looking statements are based on estimates and assumptions made by management based on management’s experience and perception of historical trends, current conditions, and expected future developments, as well as other factors that management believes are appropriate in the circumstances. Many factors could cause Economical’s actual results, performance or achievements, or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors: Economical’s ability to appropriately price its products to produce an acceptable return; its ability to accurately assess the risks associated with the insurance policies that it writes; its ability to pay claims in accordance with our insurance policies; Economical’s ability to obtain reinsurance coverage to alleviate risk; litigation and regulatory actions; management’s ability to accurately predict future claims frequency or severity, including the frequency and severity of weather-related events; the occurrence of unpredictable catastrophic events; unfavourable capital market developments or other factors which may affect our investments; Economical’s ability to successfully manage credit risk from its counterparties; foreign currency fluctuations; Economical’s ability to meet payment obligations as they become due; Economical’s dependence on key employees; Economical’s ability to manage the appropriate collection and storage of information; Economical’s reliance on information technology and telecommunications systems; changes in government regulations, supervisory expectations or requirements, including risk-based capital guidelines; Economical’s ability to respond to events impacting its ability to conduct business as normal; Economical’s ability to implement its strategy or operate its business as management currently expects; general economic, financial, and political conditions; the competitive market environment; Economical’s reliance on independent brokers to sell its products; success and timing of the demutualization process; the outcome of a demutualization transaction; and periodic negative publicity regarding the insurance industry or Economical.

All of the forward-looking statements included in this MD&A are qualified by these cautionary statements and those made in Section 12 — “Risk management”. These factors are not intended to represent a complete list of the factors that could impact Economical; however, these factors should be considered carefully, and readers should not place undue reliance on the forward-looking statements we make. We are under no obligation and have no intention to update or revise any forward-looking statements, whether as a result of new information, future events, or  otherwise, except as required by law.